The Bank of England will consider the benefits of cutting interest rates further towards zero this week, as leading economists warn that a Greek exit from the EU could plunge the UK into financial chaos next spring.

The monetary policy committee was under pressure to slash the base rate to 0.25 per cent - the lowest in the Bank's 318-year history - after disastrous output figures last week showed the economy had plunged further into recession than was thought.

But a 'triple-dip' would be unprecedented and could threaten Britain's AAA credit rating, which was confirmed at the weekend by ratings
agency Standard & Poor’s.

The Bank of England slashed rates to 0.5 per cent more than three years ago and injected QE cash into the economy - but more might be needed

Azad Zangana, from leading investment
company Shroders, said he believed the country's GDP would increase by
0.5 per cent in the current quarter. He predicted it would continue to
grow until March before two consecutive quarters of negative growth, he
said to the Sunday Times.

Michael Saunders from Citigroup said
he believed the GDP would only grow by 0.3 per cent in 2013 and
confirmed the risk of a triple dip recession.

'My guess is that for the next few
quarters, after a technical bounce in the third quarter, the economy
will be roughly flat, which I would describe as a disastrously bad
outcome compared with previous cycles,' he said.

The warnings come after research last week showed the UK was uniquely vulnerable to a deepening eurozone crisis (see map below).

Risk map: The UK stands to lose more than any other nation from a eurozone meltdown (see story below)

Although a rate cut would provide a
£600million boost for homeowners, it would slash already poor returns
for savers. But before the MPC
meeting, key surveys this week the figures will provide the first real
sign of how the economy has performed at the start of the third quarter.

There are hopes the initial impact of
the ‘Olympic effect’ and the bounce-back from the Diamond Jubilee double
bank holiday will have put some vim into the figures for July, from the
Chartered Institute of Purchasing & Supply.

Good news came from which at the weekend confirmed Britain’s top
AAA credit rating.
But the worry is that the numbers will be flattered by comparison with
the dismal performance so far this year, and that beneath it all the
economy remains weak.

Last week, the first estimate for
growth in the second quarter showed a drop of 0.7 per cent, against an
expected fall closer to 0.4 per cent.

Three critical surveys this week
relating to July will be scrutinised for signs of an upturn, not least
by the MPC, which is thought to have a high regard for the surveys, and studies them for early signs of economic trends.

Key surveys: Construction figures for July are to be published on Thursday

The first, on Wednesday, covers
purchasing managers in manufacturers, the second, on Thursday, relates
to those in construction and the third, on Friday, covers their
colleagues in service industries.

Although the services survey is
released after the conclusion of the MPC meeting, Financial Mail
understands it will have seen the results before any decisions are
taken.

‘These are the first set of figures that we have from the start of the
third quarter,’ said Peter Dixon, strategist at Commerzbank. ‘They ought
to show some improvement on the June data, and if so that would be a
cause for hope.’

Most economists are not expecting the MPC to take
the step this week, but a quarter-point cut in the base rate would be welcomed by about two million homeowners with tracker mortgages, who could save more than £200 a year on a loan set at the average house price of £162,400.

But it would mean another hammering for savers, bringing Britain closer to zero-interest savings accounts – like Switzerland in the Seventies and Japan in the Nineties. A base rate at 0.25 per cent would mark an all-time low since the Bank was founded in 1694.

Out of 11 million mortgages, about two million are so-called trackers, which move in line with the base rate. They represent £246billion in outstanding mortgage debt out of £1,230billion – about a fifth of the total.

Assuming an average tracker rate of 1.5 per cent above the base rate, a cut from 0.5 per cent to 0.25 per cent would mean more than £600million in interest payments could be saved in just one year.

Heading south: UK GDP has been declining since climbing out of recession in 2009.

However, there is doubt whether consumers would actually spend the extra cash.

Howard Archer, of independent forecasting group IHS Global Insight, said: ‘One would like to think some of this would go into spending, but if the situation is one of uncertainty then people are likely to pay off the principal.’

He added that, with savings rates so low, many would simply reduce their debts, because – unlike savings income – reductions in debt income are tax-free.

And he revealed he did not expect the MPC to cut the base rate as early as Thursday, despite poor growth figures. Instead both a base-rate cut and an extension of the MPC’s money creation programme, currently at £375billion, would likely be discussed.

However, the committee will also have the latest quarterly Inflation Report to work on, with more gloomy projections than were available in May’s report.

Mr Dixon at Commerzbank, said: ‘On growth, the picture will be much darker. Much of this has been blamed on the problems of the eurozone.’

Estimates for UK growth have been slashed, according to researcher Consensus Forecasts.

Three months ago, the average
estimate of analysts for this year was 0.7 per cent and for next year
1.8 per cent. Now they are 0.1 per cent and 1.6 per cent respectively.